Blog about how a Malaysian doctor invests his money! All ideas about investment are welcome.

Saturday, January 08, 2011

Is Penang Property Price too High?

Is Penang Property Price Too High?

I certainly agree with you that a normal working adult can not afford to buy a landed property in Penang Island and you might know, Penang island property price is the highest in Malaysia, even above the level of KL property. However, as compared to property in Singapore, we are still far far behind.

So the question now is will Penang property price goes higher this year?? I am not a economist but I agree that the price now is far beyond the average people can afford, I don't quite understand why the property in penang Island is so high even though the renatl yield si not as good as KL property but one thing for sure, the property price in penang Island in 2011 will be higher!!

One lesson I learned in property investment is the property price always lag behind stock market about 3-6 months, which means when the market is bull, the price in property will shoot up after 3-6 months behind stock market.

However, be aware that I told you that the market will make a U turn likely in 2012, therefore I anticipate the property price will cool down starting from middle of 2012.

7 comments:

I have been looking at Penang properties for the last 5 years. Couple of observations as to the high prices in Penang.

1. It is clear now the average person - just out of school and starting in the labour force is unable to afford landed in Penang island. Based on a single individual income, it will be a 'stretched out' to buy case. Sadly Penang will likely go the way Singapore went - where you will need both husband and wife combined income to jointly own landed and live in it.

2. The recent spate of government initiatives (100% for low wage earners, etc) clearly indicates the widening income gap amongst the working class. Note this is not just a Penang issue, it is quite an Asia problem - from Malaysia, Singapore to Thailand, even India.

3. Malaysia like most of Asia did get slammed in the 2007/8 crisis but did a very sharp V-shape rebound. Let's not kid ourselves, the rebound is an Asia phenomenon - not just Malaysia. Developed economies went under while the prospect of growth is still in Asia. The hot money worldwide went chasing after returns in Asia - in stocks and properties. Just look at stock markets and property prices in Asia.

4, The revision of loan limits to civil servants to 250k a while back definitely has some upward impact on prices.

5. Developers caught the Dubai mentality - you build it, they will come. Just look at the super condo launches since 2006/2007. Safe to say the majority are hot money/retirement money from foreigner powering this sector. This is all hunky dory as long as the world still believes that Asia economies will continue to grow.

6. Global commodity prices all shot up. Land costs shot up. All in the last 3 years. Hence all these are reflected in the selling prices of new builds. Add to that an already feverish property market, you have the kind of prices today.

7. There has been far to much emphasis on building luxury mid/high end properties. Land is definitely finite on the island and when the land bank is mis-directed to foreigner's money/investment. What you get is the man on the street is gradually priced out of Penang island.

Very sad for Penang. Give it another 10-20 years, Penang will be a sorry state, no different from London. Millions of people travel into London to work not because they want to but because they cannot afford to stay in London. Central London is majority owned by the old rich and/or foreigner money.

I would say enjoy Penang while you can. The social transformation of Penang is already happening.

Definitely overpriced. Rent return of 2-3% is not sustainable! Even FD offers higher rate! Developers like BSG can't sell their properties but they played the trick of getting their employees to book. Then when you asked if they have a unit, they will tell you they will check with owner. And the sale price will actually be the same as their price! So many of their projects cannot sell out, supply is definitely more than demand! Developers keep building and promoting coz the margin is too high! So keep your eyes open and don't fall into their traps. If you buy an overpriced property, when the price goes down, you will be stuck with high loan yet devalued property. So be cautious!

Cost of building for the developer is only RM20-30/sq ft, so they are making too much money that's why you keep seeing new properties coming up and they keep telling you that prices will go up. It's all BS if you look at the national income per capita. It's not sustainable!

My real estate friend told me market has cooled down significantly after the new regulation in Novemeber 2010, 3rd loan one can only get 70% financing. So give it a few more months, I already observed many houses being on sale for months and still selling. What does this mean?

Prices are too high and buyers are not willing to pay! When supply is more than demand, price will definitely drop!